Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below: Minden CompanyBalance SheetApril 30AssetsCash$10,000Accounts receivable 62,750Inventory 32,750Buildings and equipment, net of depreciation 219,000Total assets$324,500Liabilities and Stockholders’ EquityAccounts payable$69,000Note payable 22,700Common stock 180,000Retained earnings 52,800Total liabilities and stockholders’ equity$324,500  The company is in the process of preparing a budget for May and has assembled the following data: Sales are budgeted at $254,000 for May. Of these sales, $76,200 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.Purchases of inventory are expected to total $137,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.The May 31 inventory balance is budgeted at $45,000.Selling and administrative expenses for May are budgeted at $98,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,550 for the month.The note payable on the April 30 balance sheet will be paid during May, with $350 in interest. (All of the interest relates to May.)New refrigerating equipment costing $8,700 will be purchased for cash during May.During May, the company will borrow $27,400 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. Required:1. Calculate the expected cash collections for May.2. Calculate the expected cash disbursements for merchandise purchases for May.3. Prepare a cash budget for May.4. Prepare a budgeted income statement for May.5. Prepare a budgeted balance sheet as of May 31.

Question
Asked Dec 6, 2019
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Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:

 

Minden Company
Balance Sheet
April 30
Assets
Cash $ 10,000
Accounts receivable   62,750
Inventory   32,750
Buildings and equipment, net of depreciation   219,000
Total assets $ 324,500
Liabilities and Stockholders’ Equity
Accounts payable $ 69,000
Note payable   22,700
Common stock   180,000
Retained earnings   52,800
Total liabilities and stockholders’ equity $ 324,500
 

 

The company is in the process of preparing a budget for May and has assembled the following data:

 

  1. Sales are budgeted at $254,000 for May. Of these sales, $76,200 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.

  2. Purchases of inventory are expected to total $137,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.

  3. The May 31 inventory balance is budgeted at $45,000.

  4. Selling and administrative expenses for May are budgeted at $98,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,550 for the month.

  5. The note payable on the April 30 balance sheet will be paid during May, with $350 in interest. (All of the interest relates to May.)

  6. New refrigerating equipment costing $8,700 will be purchased for cash during May.

  7. During May, the company will borrow $27,400 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

 

Required:

1. Calculate the expected cash collections for May.

2. Calculate the expected cash disbursements for merchandise purchases for May.

3. Prepare a cash budget for May.

4. Prepare a budgeted income statement for May.

5. Prepare a budgeted balance sheet as of May 31.

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Expert Answer

Step 1

A Cash Budget represents the cash receipts and cash payments for the period. It helps the company to project its cash position as on particular date or after certain major payments are made.

Computation of Cash Collected

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Computation of Cash Collected Particulars May Sales 254000 Cash Sales 76200 Credit Sales 177800 Cash Collected in May Credit Sales- 50% 88900 April Month Sales 62750 Total Collections in May 151650

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Step 2

Computation of Purchase Payments

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Computation of Cash Payments Particulars May Purchases 137000 Cash paid for May purchases-40% Cash Paid for April Purchases 54800 69000 Total Purchase Payments in May 123800

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Step 3

Computation of Ca...

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Minden Company Cash Budget Particulars May Opening Bal 10000 Add: 255250 Cash Sales 76200 Credit Sales 151650 Bank loan 27400 Less: 253950 Purchase Payments 123800 Selling Expense Repayment of Notes Payable 98400 22700 Interest on Notes Payable 350 Capital Expenditure( Equipment) 8700 Closing Bal 11300

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